This week, a proposal to tax cars by the mile seemed to take the country by surprise. But, yawn, it’s actually so 2009.
Two years ago, a “tax by the kilometer” was made law in Holland. At the time, it was fun to speculate which country might be next (Germany had interest in the concept), including whether the US might seriously consider a similar proposal since studies on the issue were already being conducted. Additionally, a number of states were chatting up the idea as expenses to maintain roads increased and federal funds declined.
So, it wasn’t a big shock all around to hear that there is legislation being tossed around that would study the idea at the federal level. However, the mention of the draft legislation to study the idea being “leaked” made for great political fodder. The story of the Obama administration’s “new tax” spread quickly, even though the real story is that there is no story – yet. The Obama administration hasn’t thrown its weight behind any such proposal (and in fact, in years past, adamantly opposed the idea). More significantly, it’s not a real proposal.
To clarify: there is, despite the commotion, no actual legislation pending which would impose a tax by the mile. It is, instead, a proposal to decide whether to fund a study to determine whether to propose the idea. In other words, we’re still in the “we need a study to decide if we need a study” phase.
The media frenzy around the idea does, however, raise some good questions such as why this is something that’s even being whispered about right now. Here’s the obvious answer: there’s no more money. Pretty simple, huh? The federal gas tax is not pumping (sorry) enough money into the system to pay for the federal spending on highways. In fact, the highway trust fund has actually been running at a deficit for the last few years and it looks like that’s not going to change. Our highways are getting worse, not better, in terms of maintenance, and as a country, we love to drive. We have to do something.
The easiest solution to implement – though not necessarily to pass – is to increase the federal gas tax. In terms of convenience and cost effectiveness, this makes sense. The federal gas tax rate hasn’t been touched in nearly 20 years, making it fair game. However, considering that gas costs more than $4 per gallon in many places these days (in my neighborhood, it has hit $4.13 for regular unleaded), the idea is about as popular as Charlie Sheen headlining at a church revival.
That means that the feds have to find another solution, which is why the “tax by the mile” concept popped back up again.
As taxes go, it fits much of what Americans claim that they want, this whole idea of making folks pay for the services that they actually use. If you don’t use the roads, you don’t pay for them. If you drive a little, you pay a little. If you drive a lot, you pay a lot. That seems about right for most taxpayers.
Except for three little letters. No, not T-A-X but G-P-S.
The concept of taxing cars by the mile would require some sort of measuring system in order to impose and collect the tax. The most reliable and efficient system for this would be the installation of a GPS in each vehicle which would measure the actual miles driven. But – and you see where I’m going with this – that would mean that the government would have a very effective means of tracking your whereabouts. Many taxpayers aren’t comfortable with that idea. It’s especially discomforting when there is no guarantee that data gathered for one purpose (revenue raising) wouldn’t be used for other purposes (criminal investigations or immigration, for example) in the future.
A less invasive means of measuring the miles driven for federal tax purposes would be to require states to note the miles driven per vehicle during annual motor vehicle inspections and collect the tax on behalf of the feds at the state level. However, not all states require annual motor vehicle inspections. Complicating matters, those states that do require inspections don’t share the same criteria from vehicle to vehicle. Our Honda, for example, gets inspected each year in Pennsylvania while our Fiat Spyder, which is garaged for most of the year, doesn’t since it qualifies as an antique car. Would that mean that we get a pass on driving the Fiat but have to pay for the Honda? Exceptions and variations from state to state – and even within each state – could make compliance confusing.
Realistically, there are a number of issues and questions that will have to be answered before the notion of a “tax by the mile” is even seriously considered. With so much *ahem* riding on it, you can bet that we won’t have any substantive discussions about plugging the holes in the highway budget after the 2012 elections.
